… And Imation’s Answer

Imation Corp., a shareholder of Arlington Asset Investment Corp. sent a letter to Arlington shareholders highlighting a number of false and misleading accusations made by Arlington against Imation. 

Imation believes Arlington’s smear campaign was designed to deter Arlington shareholders from accurately understanding their voting options with respect to Arlington’s upcoming annual meeting of shareholders on June 9.

Imation urges Arlington shareholders to not be fooled by Arlington’s misstatements and to vote the gold proxy card today for Imation’s five highly-qualified, independent, shareholder-first nominees, who will seek to increase the value of Arlington for the benefit of all Arlington shareholders.

The full text of the letter is below:

May 23, 2016

Dear Fellow Arlington Shareholder:

Arlington Asset Investment Corp.’s annual meeting is fast approaching. Please join Imation in a key step toward restoring shareholder value at Arlington by voting for the election of Imation’s five nominees – Scott R. Arnold, Barry L. Kasoff, Raymond C. Mikulich, Donald H. Putnam and W. Brian Maillian – on the gold proxy card today. If you have previously signed and returned a white proxy card, it is not too late to change your voting preference. Your vote on the gold proxy card is critical in order to protect the value of your investment.

Do not be misguided by Arlington’s false and misleading claims about Imation
Arlington has made a number of false and misleading accusations against Imation during this proxy contest. We believe you deserve to know the truth about Imation, our nominees and our go-forward strategy to restore value at Arlington so that you can make an informed decision at the Arlington annual meeting of shareholders on June 9.

Arlington is wrong about Imation’s restructuring
Arlington has made false statements regarding Imation’s ongoing restructuring and compensation paid to the Imation board during a period in which then-current management was unsuitable to serve.

The truth is Imation’s current board members identified problems plaguing the company and stepped up to address the situation when then-current management was unequipped to do so. Imation’s directors invested their own cash to support a strategic, value-creating turnaround of Imation, which included a termination of Imation’s underperforming legacy businesses, an aggressive rationalization of corporate overhead (including a sale of the company’s corporate HQs), an amendment to the company’s cash investment policy, and a revised go-forward business strategy supported by well-calculated acquisitions.

Upon completion of Imation’s restructuring plan, Imation will be a leaner, nimbler and more focused company that will be well-positioned for ongoing success.

Arlington is wrong about Imation’s relevant industry expertise
Arlington has made false statements regarding the industry experience of Imation’s slate. The fact is Arlington’s incumbent slate has no direct mortgaged-backed securities (MBS) investing experience outside of its management representatives and lacks the necessary MBS and asset management skills to create value at Arlington. And yet these are people charged with overseeing your investment and management team. Imation’s nominees, on the other hand, have significant expertise in MBS, real estate investing and asset management, and we believe are all far more qualified than Arlington’s incumbent directors.

Arlington has misstated our intentions on dividends
Arlington has made false statements implying that we would reduce the company’s dividend. The fact is we believe management’s inability to generate operating earnings to pay the dividend has led to severe deterioration in book value. Maintaining the current dividend and paying dividends in the future are fundamental to our go-forward strategy. The key distinction is we want to improve operating earnings and reduce risks to ensure the dividend is sustainable and has the potential to be increased in the future.  

Arlington has given shareholders false hope in a full return of book value
We have shown in our materials that management has deceived shareholders in its presentation of its true operating earnings and financial health. For years, management has masked poor performance by paying a dividend from capital reserves and new equity financings. Arlington has told shareholders that “book value declines are temporary.” The truth is Arlington covered a substantial part of its hedge in Q1 2016, and a timely return of book value is highly unlikely.

Arlington is wrong about Imation’s cash management program
Arlington has misrepresented our cash management program despite our 100% transparency and significant voluntary disclosures. Our investment agreement with the Clinton Group, Inc. for cash management calls for no management fee and a 25% incentive fee based upon value creation subject to a high-water mark. The investment has daily liquidity and has been a profitable, flexible cash management solution for Imation. In fact, we have offered to abandon our proxy contest if the incumbent management team restructures its compensation structure to mimic a no management fee and 25% incentive fee deal. Why are they criticizing something that they are unwilling to do?

Arlington shareholders deserve better
We have heard of a number of complaints from fellow shareholders who have received harassing phone calls from Arlington’s representatives. If you are one of those shareholders, please do not hesitate to contact us directly by calling our proxy solicitor at 855-305-0857 or emailing us at riseuparlington@imation.com.

Unfortunately, we have been unable to contact many of you as Arlington has refused to provide us with a copy of its shareholder list. Therefore, you are only hearing one side of the story – the Arlington side, which is riddled with false and misleading claims regarding Imation and its nominees. We invite you to review the materials available at www.riseuparlington.com to learn about our nominees and to get a clear and accurate picture of Imation’s strategy for Arlington so that you may make an informed voting decision.

Do not be fooled by Arlington, who is wasting shareholders’ dollars – your money – on this long and costly proxy fight. We urge you to protect the value of your investment and vote the gold proxy card for Imation’s five highly-qualified, independent, shareholder-first nominees, who will seek to increase the value of Arlington for the benefit of all Arlington shareholders.

Learn more at www.riseuparlington.com
Your vote is important. No matter how many shares of Arlington you own, we urge you to vote your gold proxy today, to ensure that your instructions are received in a timely manner. Please vote by telephone or Internet by following the instructions on the enclosed gold proxy card or by signing, dating and mailing your card in the enclosed envelope.

If any of your shares of common stock are held in the name of a brokerage firm, bank, bank nominee or other institution, they can only vote your shares upon receipt of your specific instructions.

Thank you for your support,

Joseph A. De Perio
Chairman, Imation

Read also:
Imation Letter To Arlington Shareholders
Underscoring “abysmal performance” under incumbent board
2016.05.18 | Press Release
Imation Said Urgent Need For Board Change at Arlington
Because of underperformance, continued mismanagement and ineffective gedging strategies
2016.05.11 | Press Release
Imation and Clinton Group Attempting to Take Control of Arlington’s Board
Despite owning less than 0.05% of company’s shares
2016.05.09 | Press Release
Imation and Clinton Group Intend to Nominate Controlling Slate at Arlington Asset Investment
Despite owning Less than 0.1% of shares
2016.04.11 | Press Release